Traders are betting that TSMC stock's sudden 13% sell-off will deepen

Chiang Ying-ying/AP

• Traders are making more bearish bets on TSMC stock.
• Taiwan Semiconductor shares recently tumbled 13% in just over a week following cautious industry growth guidance.
• Put-option volume on the stock is the highest in three months even after the sharp decline, Bloomberg data shows.

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Investors are betting that Taiwan Semiconductor Manufacturing Co. stock could have even more room to fall after suffering a double-digit drop.

TSMC stock has fallen over 13% since April 11, a sell-off that's wiped out more than $100 billion in market value. The most recent leg down for the shares started during the company's first-quarter earnings call, where it trimmed its growth forecast for the microchip industry. 

Put options, which are bearish bets on the stock, surged to their highest level in three months on Friday, according to Bloomberg data, suggesting more investors are wagering that the downfall will continue. Speculative fervor for TSMC has generally increased, with open interest for put and call options rising 20% from their 20-day average, Bloomberg reported.

The buzz over TSMC comes shortly after the chipmaker slashed its growth expectations for the semiconductor industry to just 10% this year, pointing to challenges like tightening export restrictions in the US and slowing growth in the semiconductor industry.

"In recent times, several major systemic political, economic and financial crises negatively affected global business, banking and financial sectors, including the semiconductor industry and markets," the firm said in a filing to the Securities and Exchange Commission last week.

It added that future risks, such as those related to inflation and interest rates, could "cause revenue or profits for the semiconductor industry as a whole to decline dramatically."

The company is following the footsteps of other tech darlings, which have stumbled in recent weeks as traders anxiously await earnings and mull the possibility of fewer Fed rate cuts this year than previously expected. Over the last week, chipmakers Nvidia and Super Micro Computer tumbled 8% and 22% respectively, while the Nasdaq Composite slumped 3%.